Even in the dark, South Africa continues to surprise

Early financial knowledge for January offers a glimmer of hope that South Africa could but keep away from a technical recession, say economists on the Bureau for Financial Analysis (BER).
The nation had a busy week for trade knowledge, with January’s mining, manufacturing, retail and wholesale commerce figures being revealed this week.
In response to the BER, whereas the year-on-year (y-o-y)declines throughout most sectors had been as anticipated – given the severity of load shedding at first of 2023 versus 2022 – there was month-on-month development from some industries, which got here as a “most welcome” shock.
“Whereas early days, this does agency up our view that the economic system could keep away from a technical recession following final quarter’s decline,” the BER stated.
That is notable, because the optimistic month-on-month knowledge follows surprising This autumn 2022 GDP figures revealed final week, which mirrored a 1.3% contraction of the economic system over the interval – thrice worse than the market anticipated.
The quarter’s decline was underpinned by continuous load shedding, which hit for all however two days over the past three months of the yr, tearing via the economic system.
This sounded the alarm for first quarter 2023 GDP forecasts, because the nation has skilled load shedding each single day of the yr to this point – 76 days and counting – typically at a lot larger levels than in This autumn.
Due to this, y-o-y knowledge is exhibiting the anticipated declines in manufacturing, with some faring a lot worse than others. Nevertheless, the month-on-month knowledge is much extra hopeful.
In response to Stats SA, mining manufacturing decreased by 1.9% y-o-y in January, following a 3.6% drop within the earlier month. Nevertheless, on a seasonally adjusted foundation, mining manufacturing elevated by 4.4% m-o-m in January on the again of a 23.7% surge in iron ore output.
Regardless of the month-to-month manufacturing enhance, latest worth declines meant that mineral gross sales at present costs declined by 0.6% m-o-m in January. On an annual foundation, although, gross sales had been nonetheless up by 6.8%.
In manufacturing, manufacturing declined by 3.7% y-o-y in January. Encouragingly, nonetheless, the Absa PMI for January urged a stunning uptick in manufacturing exercise.
“We will now verify that this translated to some precise manufacturing development. Manufacturing manufacturing rose by 1.1% m-o-m, which exceeded expectations and adopted a 0.5% enhance within the earlier month,” the BER stated.
Transferring to the interior commerce knowledge, wholesale commerce gross sales at fixed costs decreased by 3.6% y-o-y in January. This was the fourth consecutive annual decline.
Once more, although, the month-on-month image is extra optimistic as wholesale commerce gross sales rose by 0.4% m-o-m in January.
And eventually, whereas retail commerce gross sales at fixed costs edged down by 0.8% y-o-y in January, on a month-to-month foundation, actual retail commerce gross sales rose by 1.5% in January after a 0.5% decline in December.
Not out of the woods but
Whereas the optimistic month-on-month knowledge stirs some hope that South Africa’s economic system can presumably keep away from a technical recession, the numbers are usually not a trigger for celebration.
By all accounts, GDP numbers for the primary quarter of the yr can be a particularly shut name – and there are nonetheless two months of knowledge (February and March) to think about.
The slight hope additionally doesn’t low cost the devastating impression of load shedding on the economic system. If the nation sees development within the face of outages which have seen households and companies thrust into the darkish for as much as 12 hours a day, will probably be a shock.
Even when South Africa avoids a technical recession in Q1, the writing is on the wall.
Each main financial institution and finance group that has revealed its outcomes and forecasts for the yr have famous the impression of load shedding on the economic system, chopping development projections severely for 2023.
Whereas none have pencilled in an outright recession, all projections are sub-1% – the bottom being a mere 0.1%.
FNB lower its development forecast for 2023 to 0.4%. Absa stated development can be beneath 1%, whereas Nedbank took a harsher stance, placing the nation’s development expectations on the cusp of recession at simply 0.1%.
This dancing on the sting of recession has been echoed by the South African Reserve Financial institution, which lower its development forecast for the nation to simply 0.3% at its Financial Coverage Committee (MPC) assembly in January.
On the time, the financial institution stated that its 0.3% prediction was primarily based on South Africa experiencing 200 days of load shedding in 2023. This week, deputy Reserve Financial institution governor Rashad Cassim revealed that the nation is now anticipated to expertise 250 days of outages – making the 0.3% look shaky at greatest.
“We all know electrical energy shortages have intensified; we anticipate to have 250 days of load-shedding this yr, from 157 days final yr and 48 days in 2021,” he stated.

Learn: South Africa has reached a brand new low – and it may worsen: Reserve Financial institution